“It sounds like something Occupy Wall Street would invent if they wanted people to hate bankers even more.”
That’s how one financial analyst described the annual black-tie induction dinner of Kappa Beta Phi, Wall Street’s most secretive fraternity. Some of the biggest names in finance gathered on January 19, 2012, at the St. Regis hotel in New York to dine on rack of lamb, perform skits that mercilessly mocked Occupy protesters and prominent lawmakers and haze new members by forcing them to put on women’s wigs and gold-sequined skirts.
Among them were AIG CEO Robert Benmosche, former Bear Stearns chairman Ace Greenberg, hedge fund billionaire Marc Lasry, Credit Suisse deal maker Joe Reece, Blackstone executive Bill Mulrow, investment banking CEO Warren Stephens, Fortress Investment Group billionaire Michael Novogratz, and then-financial analyst Meredith Whitney.
The rites of the secretive fraternity, which was founded just before the stock market crash in 1929, were revealed to the outside world by business writer Kevin Roose, who crashed the party by sneaking past the sign-in desk. In his new book, “Young Money: Inside The Hidden World of Wall Street's Post-Crash Recruits,” a captivating and often heartbreaking look at the ordeal faced by young bankers who go to work on Wall Street straight out of college, Roose describes the dinner as a “gargantuan middle finger to Main Street” by a group of executives who had helped crash the economy just a few years earlier.
To kick off the fraternity’s 80th dinner, investment banker Wilbur Ross (known as the group’s “Grand Swipe”) welcome the crowd with a speech that emphasized the “importance of continuous drinking, both in bull markets and bear markets” and mocked the better-known academic honor society Phi Beta Kappa as homosexual wimps. Later, when the inductees performed in drag, some in the audience threw wine-soaked napkins at them.
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Among them were RBC Capital Markets executive Rich Tavoso, who warbled an off-key parody called “Mama, Don’t Let Your Babies Grow Up To Be Traders” and was booed. Private equity executive Paul Queally cracked bad jokes, both sexist (“What’s the biggest difference between Hillary Clinton and a catfish? One has whiskers and stinks, and the other is a fish”) and homophobic (“What’s the biggest difference between Barney Frank and a Fenway Frank? Barney Frank comes in different size buns”). At the time of the dinner, Frank was a powerful member of the House Financial Services Committee and the namesake of the Dodd-Frank legislation that more tightly regulated Wall Street.
And investment banking CEO Warren Stephens donned a Confederate flag hat and sang a parody of “Dixie” with the lines:
“In Wall Street land, we’ll take our stand, said Morgan and Goldman. But first we better get some loans, so quick, get to the Fed, man.”
When Roose pulled out his smartphone and started to videotape the performances, he was interrogated by others at the dinner. After he admitted that he was a New York Times reporter, financier Novogratz, a former Army pilot, grabbed his jacket, demanding the phone, “Give me that or I’ll fucking break it!”
Then, Ross and socialite Alexandra Lebenthal stepped in, escorted Roose to the lobby and tried to convince him that what he’d just witnessed was just an innocent party among friends. Ross even offered himself as a source for future stories – “I’ll pick up the phone anytime, get you any help you need” – writes Roose, who says that he was appalled that these powerful members of the financial elite “were content to laugh off the entire financial crisis in private.”
That self-righteous attitude was also on display when Roose visited the members of Black Diamond, Harvard’s most exclusive student-run hedge fund, founded by undergraduate Patrick Colangelo. Over dinner, most of them asserted that they’d rather skip banks like Goldman Sachs or JPMorgan to work in private equity or at a hedge fund, because those banks weren’t aggressive enough about making money.
Some members of the fund mocked Goldman for being too charitable, “a social investing place” that gives money to nonprofits. They wouldn’t want to work there because “Wall Street is about making money” and “Nobody goes into finance to do charity.”